Effective tax rate for the listed entities declined from 35% in FY20 to 26% in FY21
The corporate sector has been on a roller coaster ride in 2020-21 and 2021-22. EBIDTA and PAT grew by 24 per cent and 105 per cent respectively over 2019-20, despite a fall of 5 per cent reported by 4,000 listed entities. Around 15 sectors have reduced loan funds by Rs 2.09 lakh crore during the pandemic year 2020-21.
The reduction in the effective tax rate (ETR) in 2019-20 coupled with a prolonged period of low-interest rate regime fuelled by the pandemic seems to have been a blessing in disguise for India Inc. during the pandemic year.
The effective tax rate for the listed entities declined from 35 per cent in 2019-20 to 26 per cent in 2019-21 though actual tax paid increased by more than Rs 50,000 crore.
Tax collections have been impressive in 2021-22 with corporation tax revenue at record highs. A report by the State Bank of India shows that a cut in taxes in 2019-20 has contributed 19 per cent to the top line of sample sectors during the pandemic with sectors like cement, tyres and consumer durables showing significant contribution even in excess of 50 per cent.
An extended period of low interest rates has also helped companies in massive deleveraging and contributed on an average 5 per cent to the overall top line. Sectors like consumer durables, healthcare, and cement have benefitted the most. In terms of expenditure reduction, the overall contribution on the top line has been as much as 31 per cent with most companies finding new ways to navigate through the pandemic. Sectors like apparel and refineries have cut costs by as much as 107 per cent on average.
Expenditure has climbed up in sectors like metals, agro chemicals among others reflecting the increase in input costs with a surge in global commodity prices. Employee costs have been cut on an average by 3 per cent in 2020-21.